Hospitals, Federal Government Reach $666M Settlement In Lawsuit Over Medicare Reimbursement Policy Changes In 1980s

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Medical Malpractice / Litigation;  Public Health
Article Date: 14 Mar 2008 - 10:00 PDT

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Medicare has agreed to pay 667 hospitals $666 million to settle a lawsuit over a reimbursement policy from the 1980s, the Wall Street Journal reports. The policy, which took effect in 1986, changed Medicare reimbursement rules to exclude certain low-income patients from the formula used to determine whether hospitals qualify for greater compensation for treating a disproportionate number of indigent patients. Several hospitals challenged the rule, and it was overturned in 1997.

In 2002, Massachusetts-based Baystate Health sued CMS and HHS seeking back payment for care provided to Medicare beneficiaries in the early 1990s. A total of 667 hospitals joined the lawsuit, the majority of which are not-for-profit hospitals that provide care mostly to low-income people.

A federal judge in Washington, D.C., ruled in favor of the hospitals in 2004, and the government lost an appeal in 2005. In April 2006, the U.S. Supreme Court rejected a request for a hearing, and settlement negotiations began. The settlement is among the largest the government has reached with health care providers, the Journal reports (Won Tesoriero, Wall Street Journal, 3/13).

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